The New York State Attorney General's Investigation into Foreclosure Rescue Scams

Since early 2009, The New York State Attorney General has been conducting a nationwide investigation into the so-called "foreclosure rescue" industry. The Attorney General's investigation is in response to allegations that companies across the country unlawfully manipulate, mislead and defraud consumers through a variety of illegal tactics, resulting in increasingly delinquent mortgage payments and an increased threat of foreclosure for many homeowners.

The Attorney General has focused much of his efforts on loan modification companies that scour foreclosure notices and filings and prey on consumers desperate to save their homes from being foreclosed. These companies promise that they will negotiate with the consumers’ banks to lower mortgage interest rates, lock in fixed rates, get late fees and past due payments forgiven, and even reduce principal balances. However, many of these companies fail to deliver as promised, charge illegal, upfront fees, and use misleading advertising to lure consumers into services that oftentimes leave them further in debt and closer to foreclosure. The Attorney General's Office is also engaged in ongoing efforts to address "equity-stripping" and "sale-leaseback" schemes.

The New York State Attorney General is committed to aggressively enforcing the law against foreclosure rescue companies that take unfair advantage of homeowners. In late June 2010, his Office sent letters to over 210 companies that may be offering services to New York residents to help them avoid foreclosure or obtain a loan modification. The letter warned these companies to avoid illegal and deceptive conduct such as collecting illegal upfront fees, failing to provide legally required consumer notices, making unsubstantiated guarantees or representations regarding the results the company will achieve, and engaging in other false and misleading business practices. [Cease and Desist Letter]

In addition, the Attorney General's office has pursued investigations into more than 20 mortgage loan modification companies. The Attorney General has sued several of these companies, and reached settlement agreements with others. Recently, the New York Supreme Court issued a favorable decision in the Attorney General's case against American Modification Agency, a.k.a. Amerimod, formerly one of the largest foreclosure rescue companies in the country, and its president, Salvatore Pane, Jr. The court found that Amerimod and Pane had engaged in fraudulent, deceptive and illegal business practices that violated New York's consumer protection and real property laws. Specifically, the Court found that Amerimod violated New York's distressed property consultants law by charging illegal, upfront fees for its loan modification services, failing to provide contracts in the language of its customers, especially Spanish, and failing to provide homeowners with the legally required notice of their right to cancel within five business days. The Court also ruled that the company made numerous false claims in its advertisements, including misrepresenting the number of homes it had saved, falsely claiming to have a 90% to 100% success rate, falsely claiming to be “licensed” by a government agency, and falsely claiming that it was affiliated with “legal experts.” The decision holds the company's president and owner personally liable for engaging in fraudulent and illegal acts, and permanently prohibits Amerimod and Pane from engaging in the illegal, fraudulent and deceptive business practices and false advertising described in OAG's lawsuit. In addition, the court refused to lift a temporary restraining order obtained by the Attorney General, freezing bank accounts and other assets, and ordered further proceedings to determine the amount of consumer restitution, costs, fees and civil penalties.

In March 2010, the Attorney General sued Infinity Mitigation Services and National Modification Service in New York Supreme Court. The Office has obtained a court order and default judgment against Infinity and its principals, shutting down the company, freezing their assets and ordering them to pay a judgment in the amount of $8.8 million.

The Attorney General's office has also entered into settlements with three loan modification companies and their principals: Ronkonkoma-based ABM Mitigation Corporation (“ABM”), Ronkonkoma-based Global Modification Services, Inc., and Florida-based Raymond, Louis & Fitch (“RLF”). As part of the settlements, the companies agreed to refund fees to all customers who have not obtained a loan modification. ABM agreed to shut down its practices nationwide and RLF agreed to stop doing business in New York State. Global Modification Services is no longer operating.

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